Christine Poole is CEO and managing director with GlobeInvest Capital Management. Her focus is North American large caps.
Top Picks:
CVS Health (CVS.N)
Recently purchased at $95.14 on December 10, 2015
CVS is a leading retail pharmacy chain (67 per cent of operating profits) and pharmacy benefits manager (33 per cent of operating profits) in the United States. The retail pharmacy division consists of more than 8,000 retail drugstores. Caremark, the company's PBM, provides drug benefit services to employers, governments and insurance companies. The acquisitions of Target's pharmacies and Omnicare, a provider of pharmacy services to long-term care facilities will expand its presence in the industry. Having recently increased its dividend by 21 per cent, CVS provides a dividend yield of 1.8 per cent.
Walt Disney (DIS.N)
Recently purchased at $110.92 on December 10, 2015
Disney is a media conglomerate and premier content provider, comprised of Cable Networks (54 per cent of operating income), Parks & Resorts (21 per cent), Studio Entertainment (13 per cent) and Consumer Products (12 per cent). Its strong global brand portfolio — including Disney, ESPN, Pixar, Marvel, and Lucasfilm — supports a multi-platform strategy to exploit content across Disney's business segments. Capital spending is expected to moderate following the opening of Shanghai Disney in the spring of 2016, leading to an acceleration in free cash flow. Disney provides a dividend yield of 1.2 per cent.
Royal Bank (RY.TO)
Recently purchased at $74.75 on December 10, 2015
Royal Bank's leading domestic lending franchise, dominant capital markets position and growing wealth management business contribute to consistent financial results. Geographically, Canada accounts for 63 per cent of revenues, the U.S. 19 per cent and International 18 per cent. The acquisition of City National expands its U.S. presence and enhances RY's presence in two attractive client segments: high net worth and commercial banking. City National operates in the top three U.S. markets (New York, Los Angeles and San Francisco), where the highest number of high net worth households are located. Royal Bank's dividends are expected to grow at a similar pace to earnings growth. The stock provides investors with a current dividend yield of 4.2 per cent.
Past Picks: December 9, 2014
Mondelez (MDLZ.N)
Then: $38.56 Now: $44.36 +15.04% Total return: +16.89%
Chartwell Retirement Residences (CSH_u.TO)
Then: $11.73 Now: $12.81 +9.21% Total return: +14.23%
Alphabet (GOOGL.O)
Then: $536.11 Now: $769.83 +43.60% Total return: +43.60%
Total Return Average: +24.91%
Market outlook:
The pace of global economic growth will be the primary driver of corporate profit growth and, ultimately, equity markets. Economic growth within the euro zone remains lacklustre, so more stimulus can be expected from the European Central Bank. Accommodative policy measures by the PBOC appears to have stabilized the Chinese economy. While recent manufacturing data in the U.S. has weakened, attributable to the combined impact of reduced capital spending in energy & energy and a strong U.S. dollar, non-manufacturing or services activity remains healthy. Most importantly, U.S. employment conditions remain robust.
With the first U.S. Fed tightening in over a decade now behind us, the trajectory of policy normalization is crucial and, at this juncture, is expected to be gradual and measured, given relatively benign inflationary pressures. Equity market valuation multiples are trading close to historical averages. As a consequence, corporate profit growth will be the main driver for equity markets.
The negative profit impact from the collapse in the crude oil price and strong U.S. dollar should ease into 2016. Consensus earnings growth forecast for the S&P 500 companies is flat in 2015 or up 4 per cent, excluding energy, and 8.5 per cent in 2016. So far, we do not see signs of a recession and remain constructive on equities. Stock market pullbacks are opportunities to purchase stocks rather than a catalyst to raise cash levels.